Money laundering and the financing of terrorism

LORDS EU COMMITTEE CALL ON GOVERNMENT TO INVESTIGATE LINKS BETWEEN MONEY LAUNDERING, PIRACY AND TERRORIST FINANCING

The House of Lords EU Committee have today called on the UK Government to investigate how piracy and laundering the proceeds of crime contribute to the financing of terrorism.

In their report Money laundering and the financing of terrorism the Committee call on the Government to take the initiative in discovering the extent to which the proceeds of piracy are used to finance terrorism. The Government say there is no evidence of a link between the two. The Committee condemn this attitude as complacent; they believe the reason no link has been found is simply that none has been sought.

The Committee do not suggest that payment of a ransom should be a criminal offence, but they say that
shipowners putting together ransom money must seek consent for the payment. The authorities must know in advance how much is being paid, to whom, and where.

The Committee point out that the fight against money laundering depends on banks and others providing reports of suspicious activities to the Serious Organised Crime Agency (SOCA).
200,000 entries are made on their ELMER database each year, and there are now 1.5 million entries. The great majority are kept for 10 years even where there is no evidence that the suspicious activity was criminal. The Committee say that the Information Commissioner must investigate this.

The Committee go on to consider the impact on private sector organisations of making all these Suspicious Activity Reports (SARs).
They point out that banks and others in the private sector dedicate large sums of money and resources to making these reports to SOCA. For one bank the annual cost of complying with the regulations was estimated at £36m. The Committee are concerned that private sector organisations are not given adequate information about how and where the information they provide is used. They assert that it is only by being provided with increased case by case feedback that the regulated sector will feel persuaded of the value of the efforts it puts into complying with the SARs regime.

The fight against money laundering depends on States sharing information about the movement of money, especially information about suspicious bank accounts. The Warsaw Convention on Money Laundering and Terrorist Financing is the first comprehensive international treaty covering both the prevention of money laundering and the financing of terrorism. It will allow access to information about suspicious bank accounts across Europe.
But despite the Convention being open to signature since May 2005 the UK has yet to sign it, let alone ratify it. The Committee believe this is indefensible. They call on Ministers to set an urgent timetable for signature and ratification.

The Committee also criticise the Government for failing to implement the EU Framework Decision on mutual recognition of confiscation orders - pointing out that confiscation is one of the best methods of combating money laundering.

Commenting, Lord Jopling, Chairman of the House of Lords EU Sub-Committee on Home Affairs, said:

"The Government has done a lot to fight money laundering and terrorist financing, but much more can be done. It should be investigating the link between ransoms paid to pirates and terrorist financing. It should be working with other EU States, and more widely, on the confiscation of the proceeds of crime.

"We are concerned that the Government has been slow to adopt measures to speed the exchange of information.
The Government should act now to ratify the Warsaw Convention on Money Laundering and Terrorist Financing.

"Monitoring suspicious movements of money and suspicious account activity can only work with cooperation from banks and financial institutions. They are not being provided with enough feedback on the impact of their reports of suspicious activities. SOCA should provide them with more information on how their work helps to prevent money laundering and terrorist funding. But the Information Commissioner must examine the database on which all this information is kept."

Notes to Editors

1. The report Money laundering and the financing of terrorism is available from The Stationery Office: House of Lords EU Committee, 19th report of 2008/09, HL Paper 132.